China banks: bad loans rise

Chinese banks had the biggest quarterly increase in bad loans since 2005 as defaults rise because of the slowdown in the world’s second-largest economy.

According to data released by the China Banking Regulatory Commission yesterday, the nonperforming loans rose by 54 billion yuan ($8.7 billion) in the 3 months to 646.1 billion yuan, the highest level since September 2008. Bad loans accounted for 1.04% of total lending, up from 1% in the previous quarter.

“Asset quality is now the biggest overhang on the banking sector,” analysts at Masterlink Securities Corp. say. “The government’s reluctance to use stimulus and ease monetary policy has made it difficult for many borrowers to repay debt.”